Bank on it

By Ellen James MartinUniversal Press Syndicate

It's Friday after work, and you've stopped at your ATM to load up on cash. Spotting a flower vendor, you make the impulsive decision to take a $10 bunch of sunshine-yellow roses back to the apartment for your beloved. A loving gesture, you think, and so does she.

But wait. Isn't it more important (to both of you) to save that $10 toward the home you yearn for? Can't you imagine three other ways to say, "I adore you," without spending a penny? Of course, one bouquet of roses alone won't make or break a carefully crafted home-savings plan. But as personal finance experts point out, a pile of receipts for small discretionary purchases can quickly add up to serious money.

Many people have blind spots in their spending. They simply don't realize how much they're laying out for gifts, holidays, restaurant tabs or vacations. "All these miscellaneous expenditures don't tend to get budgeted," says John H. LeBlanc, a certified financial planner affiliated with the International Association for Financial Planning.

As tedious as it may be, an effective home-savings plan should involve scrupulous attention to detail.

"Usually the problem is that we're not aware how much money is leaking out for small things, such as lunches, cappuccinos and vending machine snacks," says Marc Eisenson, the author of several books on how to rein in spending and slash debt.

A would-be home buyer with a flabby budget needs to go on a financial fitness program, says Eisenson, co-author of "Invest in Yourself: Six Secrets to a Rich Life" (Wiley, 1998).

One part of a financial fitness program is to severely restrain your use of an ATM card, leave it at home or even cut it up. "Once that cash from the ATM machine winds up in your pocket, it's a free-for-all," Eisenson says.

"Pitch the ATM card," agrees Tom Scholten, editor of Loose Change and 4-Bits, two newsletters published by the Financial Literacy Center, a 5-year-old company specializing in publications on personal finance.

Here are a half-dozen suggestions for prospective home buyers:

Get excited about your goal as an incentive to saving money.

"Catch the fever for buying a home," Scholten says.

As sensory creatures, humans have a tough time envisioning what they can't see, feel or touch. Do a bit of preshopping for a home, even before you've amassed ample cash to make your goal a reality. Standing in a spacious family room, feeling the soft cushion of carpet beneath your feet, can help you imagine the luxury of entertaining in such a space, for instance.

One caveat on preshopping, however. A preliminary step should involve a visit to your mortgage lender's office to calculate what your income will allow. Otherwise, your preshopping excursions may lead only to eventual disappointment.

"You have to know your limits," Scholten says.

Spend a Saturday afternoon pondering money trade-offs.

Remember being a child at the candy counter with your mom? You could choose between the Hershey bar or the Juicy Fruit gum. Getting both was out of the question.

Regrettably, trade-offs are also a reality for most adults. If you like sport utility vehicles, you may automatically assume that owning an SUV is your top priority. But would you honestly rather put the money into a down payment toward a home? Only you can decide. A few weekend hours spent with a pad and paper will help you (and your partner, if you have one) rank your money priorities.

Remember that a failure to set priorities can raise barriers to your several goals. But if you're patient and pursue your aims in order of importance, you can eventually accomplish several major objectives.

Perhaps a couple of years after you buy your home, for instance, you could take that long-imagined journey to China. But if you unthinkingly spend $500 a month on casual restaurant dining or $2,000 a year on gifts, you could sabotage both your home-buying and travel plans.

Record all cash outlays for a month.

Scholten bought his first home, a country place with a sun porch, when he was just 28. To meet this and other savings goals, he makes it a habit to carefully note each cash outlay. Then, as the month comes to a close, he tabulates cash and check payments by category.

Some people might consider this an annoying, make-work exercise. But Scholten defends the practice. Watching his spending helps him guard against impulsive purchasing and keep his priorities straight.

"I've done it for four years and I'm still doing it," he says, noting that his net worth is swelling.

Give gifts "of the heart."

Many people who visit a financial planner are stunned to realize they're paying $2,000 to $5,000 a year for gifts  for holidays, weddings, birthdays or other events. Scholten suggests that inexpensive handmade gifts can be meaningful substitutes for store-bought items. For instance, Scholten still treasures a "hope chest" his father crafted for him one Christmas.

Consider downshifting cars to speed your home-buying drive.

While amassing savings for his country home, Scholten, an auto aficionado, took a reluctant step, realizing that most cars are depreciating assets while most homes are just the opposite. He sold a favored car worth $4,500 and bought an $800 substitute. "Every little bit helps," he says.

Remember that severe belt-tightening for a home won't be forever.

LeBlanc, the financial planner, finds it especially fulfilling to help individuals or couples reach the goal of purchasing a property they love. Why? Because now that mortgages that require down payments of just 3 percent or less are widely available, many home-buying hopefuls (even the cash-strapped) can reach their goal through just a couple of years of frugality and careful planning. Compare that with the decades it takes to build the huge nest-egg required to fund your retirement years.

"Setting out to buy a home is generally a short-term goal," says LeBlanc, "and you can't believe how excited people are when they reach it."